OPEC sees oil market not yet out of woods, tries to avoid new glut

LONDON (Reuters) – OPEC is seeking to avoid a build-up in oil inventories above the five-year average through a new deal with non-OPEC partners to curb supply in 2019, its secretary general told Reuters on Thursday.

Secretary General Mohammad Barkindo also said he was hopeful that oil demand would remain robust in 2019 and that the producer alliance known as OPEC+ would stick to their commitments.

Worried by a drop in oil prices and rising supplies, the Organization of the Petroleum Exporting Countries and allies including Russia agreed in December to return to production cuts in 2019. They pledged to lower output by 1.2 million bpd, of which OPEC’s share is 800,000 bpd.

“We are not yet out of the winter woods,” Barkindo said. “The principal objective is to voluntarily assist the oil markets to remain in balance through 2019 by ensuring that we avoid an inventory build up above the five-year industry average.

“The oil industry cannot afford to relapse into another downturn after surviving the longest and severe cycle,” he said in reference to a 2014-2016 oil market slump.

“We remain optimistic that healthy demand will hold during the year.

“Participating countries in the (supply cut deal with non-OPEC) have proved their commitment to working together to sustain market stability.”

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